The Market Before the Market in Poland

05/17/2015 11:21 am ET | Updated May 17, 2016

When East-Central Europe made the transition to market economies after 1989, journalists sometimes referred to the process as "overnight capitalism." This gave the impression that the countries in the region were Communist one day and capitalist the next. In fact, the market was present in most of the countries in the region in one form or another prior to 1989.

Hungary, for instance, experimented with a version of market socialism as early as the 1960s. Yugoslavia, too, introduced small-scale private enterprise early on. Much of the agricultural sector in Poland remained in private hands after collectivization failed to take hold in the post-war period. Indeed, Communist economists had been debating these questions of economic reform going back to Lenin's time and the first attempt to marry state socialism and the market, the New Economic Plan of the 1920s.

In the 1980s, economist Marcin Swiecicki was at the center of the discussions over the path of economic reform in Poland. At the time that Solidarity emerged in 1980, the Communist government began talking about forming an economic council that would look into the possibility of compromise with the opposition on economic matters. Even after the declaration of Martial Law, the government maintained this interest in what would eventually be called the Consultative Economic Council.

"General Jaruzelski confirmed to the projected president of this council, Prof. Czeslaw Bobrowski, that he was interested in independent opinions about economic reforms and policy and still wanted to have such a council," Swiecicki told me in an interview in his office in the Warsaw district that he represents in parliament. "But at that moment, there was no way that Solidarity could participate in the venture. Some people refused. But very few of the people Prof. Bobrowski had interviewed earlier refused to join the council. Several members were even sympathetic to Solidarity, no doubt about it. And one participant was even a kind of representative from Solidarity, Witold Trzeciakowski, though the deal was that he agreed to participate without being a formal member. He consulted with the Church, and the primate told him to go ahead. He took part in all of our discussions without being a formal member."

After serving as the director of research for the council, Swiecicki became its director. In the second half of the 1980s, after the end of Martial Law, the council began to exert more influence. "That's when we began to try to do something more, including the transformation of the property system," he continued. "It was necessary to create not only a market for consumer goods, an idea we promoted at the time, but also a market for property. Otherwise the reforms would not work. We were generally looking at Hungary and its approach to property. At the end of 1988 or the beginning of 1989, with the assistance of my brother who was living in Sweden, I organized a study tour for this consultative economic council to Stockholm to do a report on the Swedish economy. We wanted to look at an economy that was capitalist in form but with very broad social welfare institutions that would still take care of all the values cherished by the socialist system. We looked at how they handled foreign exchange. We examined the way they restructured large enterprises, not by subsidizing them but by bringing other companies to where this big shipyard had to be closed and finding jobs for almost all the workers. This was the Swedish model."

Although Poland was heading toward a market economy, the council didn't ultimately produce a blueprint that the government followed. "Our council produced some food for thought," Swiecicki related. "We wrote about the deregulation of prices. With the foreign debt, we said that a deal was needed to set a maximum payment that Poland could make that didn't exceed 20 percent of our export earnings. Although another solution was eventually elaborated, the point was that Poland was not able to pay back all the debt, so we had to find another solution. Our Swedish report also maybe inspired some individuals. But we didn't make any formal presentation."

Even before the Round Table negotiations began in spring 1989, the Polish government began the radical reform process. "The government deregulated the process of establishing new enterprises," Swiecicki pointed out. "It lifted 95 percent of all kinds of licenses and permits so that people could open any kind of business. This led to another kind of phenomenon. At the entrance and exit of state enterprises - supplying inputs and purchasing outputs -- were these new private companies extracting all the profits. This was called nomenklatura privatization."

Swiecicki participated in the Round Table negotiations in spring 1989 and then was elected to parliament for two terms. He also served in the Mazowiecki government as both deputy minister for economy and minister for foreign economic relations. Between 1994 and 1999, he was the mayor of Warsaw. We talked about his perspective on the economic changes that took place after 1990, his accomplishments as mayor, and his view of the political situation today in Poland.

The Interview

In 1989, when we first talked, you told me that you were involved in the discussions on economic reform. And you were part of a committee looking into different possible scenarios for Poland -- first Hungary, then Sweden. Is my memory of this correct?

Yes, very correct. After the first Solidarity period, and even during the first Solidarity period, the government was trying to find some consensus with the opposition regarding economic reform. They wanted to create an economic council. Work on this council already began in 1981, before Martial Law was declared. Then Martial Law came. General Jaruzelski confirmed to the projected president of this council, Prof. Czeslaw Bobrowski, that he was interested in independent opinions about economic reforms and policy and still wanted to have such a council. But at that moment, there was no way that Solidarity could participate in the venture. Some people refused. But very few of the people Prof. Bobrowski had interviewed earlier refused to join the council. Several members were even sympathetic to Solidarity, no doubt about it. And one participant was even a kind of representative from Solidarity, Witold Trzeciakowski, though the deal was that he agreed to participate without being a formal member. He consulted with the Church, and the primate told him to go ahead. He took part in all of our discussions without being a formal member.

At the beginning, even before Martial Law, I was invited to be the director of research and analysis in the small secretariat. Later on I became the secretary general of this council, which consisted mainly of academics from various universities and a few practitioners. There was a representative from the rural sector, one from the big industries. Prof. Bobrowski also had other informal advisors. This council produced several reports on the economic situation: on inflation, the Polish debt, investment. We gave our opinion on the national strategic plans as well as some initial moderate proposals about the economic reforms. In the first half of the 1980s, it appeared that we were not very successful in getting our advice implemented. But we produced reports that were read widely by economists, by the opposition, even by the World Bank. For example, the World Bank delegation that came to Poland for the first time in 1987 sat with us for a long time. They even sent me their report on the Polish economy for review before it went to press.

In the second half of the 1980s, when I was secretary general, we had more influence. That's when we began to try to do something more, including the transformation of the property system. It was necessary to create not only a market for consumer goods, an idea we promoted at the time, but also a market for property. Otherwise the reforms would not work. We were generally looking at Hungary and its approach to property. At the end of 1988 or the beginning of 1989, with the assistance of my brother who was living in Sweden, I organized a study tour for this consultative economic council to Stockholm to do a report on the Swedish economy. We wanted to look at an economy that was capitalist in form but with very broad social welfare institutions that would still take care of all the values cherished by the socialist system. We looked at how they handled foreign exchange. We examined the way they restructured large enterprises, not by subsidizing them but by bringing other companies to where this big shipyard had to be closed and finding jobs for almost all the workers. This was the Swedish model.

But there wasn't any blueprint for economic reform in Poland. We started with a chapter on the necessity to transform ownership relations. We were very careful for ideological reasons. We produced several papers on the transformation of state enterprises into "socialist stock companies." We persuaded the government that stocks could be distributed to universities, institutes, and private persons to create a market for the stocks and some ownership supervision over the company. The company must be somehow cut into pieces, the pieces must be transferable and traded, and we would create a certain market for the properties. You could still call it "socialist" because some institutions might be interested in having some shares in various enterprises.

I even presented this idea at SGPiS (Szkoła Główna Planowania i Statystyki - the Central School of Planning and Statistics - later the Warsaw School of Economics). But we didn't produce anything like what was produced at the Round Table or by Leszek Balcerowicz in the Mazowiecki government. We didn't develop such kind of reform. There were some elements, like reductions in agricultural subsidies and freeing prices for consumer goods, but there was no such basic blueprint for radical reforms.

Was there any discussion in 1989 between this council and either people in the Round Table talking about economic reform or later Balcerowicz and Sachs?

Not in any official way. Of course I was invited to the economic table of the Round Table, because of my visibility connected to this council and all the reforms that I promoted. But I was on the government side, which wanted to show that we also had reformers. I was invited by Wladyslaw Baka, who was a very close friend to Prof. Bobrowski. Paradoxically, even at this economic Round Table, I was defending liberal solutions against some populist trends in the Solidarity camp, like Ryszard Bugaj, who wanted some properties held collectively by workers rather than being made tradable. But I believed that property must be transferable or it wouldn't work. I'd studied the Yugoslav self-management model and the Mondragon experience in Spain. Theoretically it could work, but in practice it didn't. Of course there might be exceptions like the kibbutz in Israel, but these idealistic exceptions couldn't work on a mass scale.

Our council produced some food for thought. We wrote about the deregulation of prices. With the foreign debt, we said that a deal was needed to set a maximum payment that Poland could make that didn't exceed 20 percent of our export earnings. Although another solution was eventually elaborated, the point was that Poland was not able to pay back all the debt, so we had to find another solution. Our Swedish report also maybe inspired some individuals. But we didn't make any formal presentation.


When you look back at the Balcerowicz economic reform as it came together and was implemented, should it have been changed or modified in any way, or do you think it was the right thing to do at the right pace at the right time?


To read the rest of the interview, click here.